TPD cover pays you a lump sum if an illness or injury leaves you permanently disabled and unable to work. It allows you to cover expenses such as out-of-pocket medical costs or home and transport modifications, while supporting your ongoing financial needs so you can take care of your family.
Here are four things you should know about how it works – and some important things to know if you belong to the LGBTQ+ community.
How your TPD claim is assessed
TPD cover is paid out when the insured person is diagnosed with a disability that leaves them permanently unable to work. That can include disabilities due to the unexpected complications from gender-affirming surgery.
What does “work as usual” mean? It all depends on the definition in your TPD policy – and when you first take out your policy, you’ll typically get to choose between two options:
- Own occupation means your claim will be assessed against your ability to perform the specific requirements of the job you were performing at the time you ceased work as a result of the illness or injury. This type of policy may best suit people who work in specialised fields, such as surgeons or highly skilled tradespeople.
- Any occupation means your claim will be assessed against your ability to perform in any job you are suitably qualified or skilled to perform based on your education, training or experience.
Here’s an example. If a cabinetmaker permanently loses the use of one of their hands and they have an own occupation TPD policy, it’s likely they’ll be considered totally and permanently disabled. This is because they’re no longer able to perform the work required in their current job.
But, for an any occupation policy, the cabinetmaker may still be able to work using their skills in another capacity – perhaps as a consultant for a building supply company, or as a TAFE teacher depending on their transferable skills that form part of their education, training and experience. As such, they may not be considered totally and permanently disabled.
Typically, a benefit is more likely to be paid to you under an own occupation policy as you are more familiar with the procedures, equipment and risks of your work. As a result, an own occupation policy is more expensive than an any occupation policy. But note that own occupation policies aren’t available for all occupations.
What happens if you have a pre-existing condition
A study by the Victorian Pride Lobby discovered that close to half (47%) of LGBTQ+ respondents had experienced discrimination or exclusion when applying for life insurance. In particular, 55% of people living with HIV assumed they would not be eligible for life insurance.1
The Disability Discrimination Act 1992, makes it unlawful for an insurer to discriminate against anyone who is living with HIV or any other disabilities except where that discrimination is based on actuarial or statistical data which is reasonable to be relied upon.2 If you have a pre-existing condition, in most cases you can still get TPD insurance, but you may need to pay an additional amount, called a loading, on your premium. Or your pre-existing condition may be excluded – which means you can’t claim on anything related to this specific condition.
If you’re concerned about any pre-existing conditions, it’s wise to talk to a financial adviser before you apply for any type of life insurance. They can explain your options and support you through your application process.
How long it takes to receive a payout
TPD claims often take longer to be paid out than other types of life insurance. This is due to the complexity involved in determining whether a disability is permanent or not.
Generally, you’ll only receive a claim payout from a TPD policy when the insurer determines you have reached ‘maximum medical improvement’. Put simply, this means that your condition is stable, and that any further treatment is unlikely to improve your capacity in the future. At this point you’ll have completed all treatment, including but not limited to operations, rehabilitation or medical procedures recommended by your treating doctors.
As a result, some TPD claims can take months or even years to resolve. It also means TPD claims tend to have a higher decline rate than other life insurance cover types due to the difficulty in proving the permanency of a disability and how if will impact your ability to return to work. For these reasons, TPD cover is often taken out together with income protection and trauma cover, which can provide more immediate financial support.
How your TPD cover is structured
You can buy TPD insurance either as a ‘stand-alone’ policy with its own terms and conditions, or as a ‘linked’ policy that’s connected to life cover or trauma cover. Typically, linking policies will reduce your premium but may also impact your total cover.
For example, let’s say you have TPD cover of $200,000 and it’s linked to a $500,000 life cover policy. When you make a successful claim on your TPD cover, your life cover benefit will reduce by the $200,000 paid out for TPD. That means your life cover is now reduced to $300,000.
You may be able to buy back extra life cover in the future following payment of a TPD benefit.
